Company announces cost-cutting initiative
Blockbuster’s losses widened in the third quarter, and along with the poor results released Thursday, the company disclosed a cost-cutting initiative that has included 400 layoffs and will save it $45 million a year.
Net losses totaled $35 million in the quarter ended Sept. 30 vs. $24.7 million in the year-earlier period. Third-quarter losses included $9.6 million in severance and lease termination costs.
Total revenues dipped 5.7% to $1.24 billion, largely on the closing of 526 company-operated stores. The slide was partly offset by a $79.2 million increase in online rental revenues derived from a subscriber base that now totals 3.1 million.
While the Total Access online program has ramped up quickly, the subscriber tally actually declined from 3.6 million in the prior quarter. That drop surprised many observers.
Execs noted that as they seek to emphasize total customer reach, they will not report online subscriber growth as the company has in the past. The earnings release noted 20 million customers “used the Blockbuster brand to satisfy their needs for media entertainment.”
On a same-store basis, worldwide revenues for the quarter increased 1.1% from the same period last year, with domestic-store revs rising 2.3% and international-location revenue falling 2.8%.
Chairman and chief exec Jim Keyes, who has been in the top job only since July, said the activity in the third quarter was helping Blockbuster navigate turbulent waters.
“We believe the actions we have taken over the last quarter have better positioned Blockbuster for the future,” Keyes said. “Going forward, we are focused on protecting our core rental business, developing new retail opportunities and becoming the preferred provider of digital entertainment.”
Wall Street did not seem quite as certain Thursday. Shareholders hammered the stock, which closed down 6.08% Thursday to $4.94 on heavy volume.